Two Government Failures? A Tale of Sugar and Wool

A discussion is provided of policy developments and policy debate for the sugar and wool industries in 1992 and the first half of l993. The discussion is set against a characterisation of the longer-term economic situations of the two industries. It is suggested, perhaps controversially, that government failure has been a longstanding feature of both industries. Understanding of the policy reform needed to remove economic inefficiency is better for sugar than for wool. However, the decisions taken on sugar policy in February, 1993 mean that incentives for wasteful use of resources are maintained. In the case of wool, the Gamaut inquiry faces a challenge in trying to come to grips, in a period of three months, with the major short- to medium-term problems of debt repayment and disposal of the stockpile, as well as the apparent longer-term problem of creating incentives to restrict wool exports to the optimal level.